The End to the Asset Purchase Programme Is Imminent

As expected, the European Central Bank (ECB) is yet to make any changes to its interest rate policy, nor has it decided on whether to put an end to its bond purchases. Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW) in Mannheim, comments on the ECB’s actions:

“Even though no decision has been made yet, the end to the asset purchase programme is clearly imminent. The dramatic improvement of the economic situation in Europe coupled with higher foreseeable inflation dynamics have caused the dovish camp within the ECB Governing Council to shrink. Eurozone governments will therefore have to come to terms with financing their own deficits without the help of the national central banks from 2019 onwards.

This could present challenges for countries like Italy whose deficits and annual refinancing needs are still high. And if a populist government assumes office in Rome, we can soon expect to see the risk premiums for Italian bonds increase without the help of a loan from the ECB.”

For more information please contact:

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de